Who has to pay trade tax and who is exempt from it?
November 3, 2023 | 40,00 EUR | answered by Simon Schaaf
Dear tax advisor,
I am currently facing the decision of whether I have to pay trade tax as a self-employed person or if I may be exempt from taxation. I operate a small business in the IT services sector and have heard that there are certain criteria that determine whether trade tax must be paid or not.
At the moment, I do not have a clear understanding of what conditions need to be met in order to be exempt from trade tax. I am concerned about how trade tax will impact my financial situation and whether I may have to make high tax payments.
Therefore, I would like to know from you who exactly has to pay trade tax and who is exempt from it. Could you please explain to me what criteria need to be met in order to be exempt from trade tax as a self-employed person? Are there specific tax-free allowances or exceptions that I could take advantage of?
I would be very grateful if you could help me clarify my tax situation and provide possible solutions to minimize potential tax payments.
Thank you in advance for your assistance.
Sincerely,
Bernd Altmann
Dear Mr. Altmann,
Thank you for your inquiry regarding trade tax and your tax situation as a self-employed individual in the IT services sector. It is understandable that you are concerned about the impact of trade tax on your financial situation and wish to minimize potential tax payments.
In general, all businesses operating a trade in Germany are required to pay trade tax. This applies regardless of the legal form of the company, whether it is a sole proprietorship, a partnership, or a corporation. The amount of trade tax is based on the trade income, which is calculated by determining the profit from the trade.
However, there are certain allowances and exceptions that allow companies to be exempt from trade tax or at least pay a reduced amount. One of these criteria is the so-called "trade tax allowance". This allowance is €24,500 for sole proprietorships and partnerships, and €5,000 for corporations. Companies with a trade income below this allowance are exempt from trade tax.
There is also the option of offsetting trade tax payments against income tax. If you as a self-employed individual pay income tax on your profits, you can deduct the trade tax paid as business expenses from the income tax.
To ensure that you make use of all available options to minimize your tax payments, I recommend contacting a tax advisor. An experienced tax advisor can analyze your individual situation and provide tailored solutions to optimize your tax burden.
I hope that this information has been helpful and has given you a better understanding of your tax situation. If you have any further questions or need assistance, please do not hesitate to contact me.
Best regards,
Simon Schaaf, Tax Advisor
